I've been getting some questions from students, residents, and new attendings about dealing with student loans and some of the changes that have taken place since I went to medical school. Now, I've never been an expert on student loans, since my grand total of undergraduate and medical school debt was a whopping $5,000. But I've decided to look into some of these issues in an effort to help out you readers.
First, a brief discussion of how I paid for my schooling. I took 7 steps to minimize my debt burden that I think most prospective physicians can take if they are willing to. I suggest all take at least some of these steps.
Choose an Inexpensive Undergraduate School
When was the last time someone asked what undergraduate school you attended? My patients don't even care where I went to residency, much less any of the previous steps. Now I'm no dummy, I've served on a medical school admissions committee. I know those committees are more impressed with a Princeton grad than a degree from Podunk State. But a 3.9 is a 3.9. I was generally more impressed with a 3.7 from a decent state university than a 3.1 from a prestigious university. Attending a junior or community college for a couple of years and then transferring is also a great way to keep expenses down. Public four-year colleges, on average, charge $7605 for tuition. ($2713 for junior colleges.) On the other side of the spectrum, private colleges on average charge $27,293 per year for tuition. Now, you can probably argue that the education is better at Brown University ($40K per year) than at the University of Texas ($10K per year.) But four times better? Hardly. My particular undergraduate institution, consistently ranked in the top 100 (and occasionally top 50) has a current tuition charge of less than $5000 per year. Many graduates go on to prestigious medical schools all over the country.
Take Advantage of Undergraduate Scholarships
If you're smart enough to become a doctor, you ought to be smart enough to get scholarships. Not only does an academic scholarship help you keep your debt load down, but it also forces you to keep your grades up, not a bad thing for a pre-med. In my case, I didn't pay tuition at all for four years.
Benefits of A Great Loan
Federal student loans, unfortunately, now suck. In an era when my credit card gives me 0% for 18 months and mortgages of 3.5% are available, it sucks to pay 6.8% for an education, especially when those who graduated just a few years earlier consolidated at 1.9%. I had an even better deal, although I confess it was due to my Alaska residency. In the 1990s Alaska's student loan program had a rate of 8%. But the terms were exceptional. The interest (and payments) were suspended while you were an undergraduate, a medical student, a resident, and a military member. So a $5K loan I took out in 1993, and paid off without having paid any significant amount of interest in 2010, essentially cost me $3K in 1993 dollars. Thanks to inflation, my student loan paid me to go to school. In retrospect, maybe I should have taken out more!
Work Your Way Through School
I busted my butt for four months a year working at least full time in the summers. I lived for the next eight months off those savings. I even had a few part-time jobs during the semesters. I kept my grades up, played intercollegiate athletics, and still managed to have a good time. It's not that big of a deal. In fact, one of the little known secrets of medical school is that you can continue to hold part-time jobs even as a medical student without hurting your education. I skiied 30 days a year for the first couple years of medical school. I didn't work then, but I sure could have. My fourth year I took a job doing H&Ps at an outpatient surgical center. It paid $20 an hour. It's not doctor pay, but it sure paid for a lot of living expenses.
Choose an Inexpensive Medical School
Sure, the cost of all medical schools has skyrocketed in the last decade, but some are still far cheaper than others. At the University of Mississippi tuition is less than $16,000 a year. At Tufts it is $54,000 a year. Again, do you really think the education at Tufts is worth over 3 times as much as at the University of Mississippi (and it'll be far more than that after the interest on those loans adds up.) Many pre-meds don't have much choice, since they only got in to one or two schools. But for those with a choice, choose wisely knowing those loans may be with you throughout your career. The price of tuition should be a MAJOR factor in your decision.
Benefits of Joining the Military for Medical School
Obviously, this isn't, and can't be, for everyone. In fact, I'm not even sure I'd do it again. But it's a great way to minimize medical school loans. For many specialties, you are trading money later for money now, since the military will pay you far less than you'd otherwise make until you've paid off your commitment. But for those going into primary care, and particularly for those attending expensive medical schools, the military and similar public service programs can be a great financial deal. (But don't choose it for the money.)
Lived within Your Means As Students and Residents
I was surprised to see other medical students taking out the maximum loans they could. Sure, I had a military stipend to live off of. But it was only $900. That didn't go far. My spouse worked some and I worked some and we lived off what we had. It was a tight budget. No additional loans for “living expenses.” Some people continue to take out loans even as residents! Trust me, if you can't live within your means on $40K a year you won't be able to do it on $200K a year. The lessons we learned living on $15K a year and $40K a year are key to our financial success today. Even those who are paying for medical school completely on loans can do what they can to minimize those loans. It also helps to choose a medical school and a residency in any area with a reasonable cost of living. It's tough to live on Manhattan on $40K.
Challenges Pre-Meds and Medical Students Now Face
Now, let's talk about the two problems facing our current pre-meds and medical students that I never had to wrestle with. First, the cost of attendance.
Tuition Inflation
The rate of tuition inflation is unbelievable. The medical school I matriculated into 12 years had a tuition of $10K a year. That tuition is now $15,000. The University of Colorado charges it's out of state students $82,000 per year. I remember not applying because it was $50K 12 years ago. Even without living expenses, four years of $82K loans means coming out of school with well over $300K in debt. Add in living expenses and interest and that amount could easily be half a million bucks by the time a doc gets out of residency. That's nuts.
Unsubsidized Student Loans
The second factor comes from the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA.) It sounds good from the title, but it has really hosed over medical students. It used to be that you would graduate from medical school with a bunch of different loans at different rates. Then, when rates went down, you would consolidate them all. Some of my classmates have their loans at 1.9%. ECASLA, however, makes it so you can only reconsolidate your loans at an AVERAGE of their rates. Well, that doesn't save you squat on interest. If this act wanted to really help you out, it would make student loans deductible even for high earners (currently phased out at $60-$150K.) To make matters worse, even subsidized Stafford loans are going to be issued at 6.8% starting a year from now. You can only take out $8500 a year in subsidized Stafford loans. Everything else will be accumulating interest (at 6.8%) throughout medical school, residency, fellowship etc. Using the rule of 72 you'll quickly see that your loans will basically double over a decade of training. So, $8500 a year in subsidized Stafford loans, plus another $12,000 in unsubsidized Stafford loans. That won't go far toward that University of Colorado tuition. Now you'll be looking at Grad Plus loans (currently 7.9%). You'd think you were a subprime mortgage buyer with a bad coke habit with that interest rate. Other private loans are also available, but probably require a co-signer. You might be able to defer payments, but not the accumulation of interest. No wonder some students run up so much credit card debt, it isn't that much worse than what's being offered for “good” loans! Oh, and to make things worse, the subsidized Stafford loans are going away. Next year they'll all be unsubsidized.
Financial Impact on Doctors
What does this all mean? It means several things, especially when combined with the lower incomes that will likely be available to physicians in the future. First, doctors will take much longer to reach financial independence, and early retirement will be much more difficult. Second, doctors will have to live a much lower lifestyle than they have in the past, at least until loans are paid off. Your partner may have bought a BMW and a big house a year out of residency and been able to afford it 10 years ago. If you now have $600K in student loan debt at 7%, guess what, you can't. Third, access to primary care will become more difficult as medical students simply can't afford (and certainly don't want) to only make $80-150K after a decade of training. This will mean more fractured care, more expensive care, and more inappropriate use of emergency departments and other specialists.
There's not a lot an individual doctor can do about all this. You can take some of the steps I outlined above to minimize your debt. You can live like a resident and pay that debt down as soon as possible. You can choose a higher-paying specialty (if you're one of the few who enjoys more than one equally). You can also take advantage of the Income Based Repayment and Public Service Loan Forgiveness programs I'll discuss in the next two posts in this series.

I am currently a 4th year medical student in the North East. I will be graduating with $180,000.00 total dept (undergrad + med school) with 90% being at a fixed 6.8% rate. I want to share my ideas on the current situation.
Currently, everything that is in place is working against us students. Tuition is very high and growing fast, Federal Loan interest rate is at a fixed 6.8% (stafford) and 8.5% GradPlus, and part-time jobs are more difficult to find. I heard an economist say there are more young people with college degrees working as waiters and bartenders then as engineers (from NPR program “On Point”). I followed the steps listed above: went to a state school and lived at home & worked in undergrad. Then chose an inexpensive med school and applied for a lot of scholarships (got about $46,000.00 over 4 years). Have no private loans and no credit card dept. Live bellow my means for as long as I can remember.
But look at what happened, my dept is still huge:$180k is a lot of money. And the 6.8% fixed interest rate sucks. The monthly payment is $2,071.45 (if a 10year plan). And how much do I make as a resident – $3,200.00/month post taxes? So I won’t be able to pay much for 4-5 years of residency. I will be signing up for an IBR (income based repayment plan), there is just no other option that I can see working well. The 6.8% will make me pay ~$69,000.00 in interest over 10 years, had it been 1.9% like above I would have paid only $18,000.00 in interest.
It is pretty much impossible to go to a cheap medical school these days. Look at the tuition database from AAMC (2010-2011: http://services.aamc.org/tsfreports/).
Looking at Private schools: only 4 out of 53 have total tuition less than $30k/yr. Looking at Public schools: 8 out of 78 have tuition less than $30k/yr if out-of state and 56/78 have tuition less than $30k/yr if in-state (looks like a good number but getting into your state school is not guaranteed and everyone applies out of state).
So the reality is that education is becoming very expensive and very fast. I cannot talk to an attending, even a young one, about any of this because they have much lower dept. The “financial advisers” out there keep telling everyone that “its OK, once you start working you will pay your dept in no time”; who are they kidding?. The sad part is that I already see 1st year residents buying lexus cars and condos and taking out doctor loans telling everyone how great it is. So many of us never learn.
The current med students are a special group and our specialty choices and practice options will be heavily influenced by options for dept repayment and loan forgiveness. The “good old days” are certainly not there anymore.
Would you mind posting where you found these scholarships for medical school? I am looking to do the same and am making sure to exhaust all resources. My plan is to find as many small scholarships as possible, but it is not as easy it sounds. No one feels bad for doctors and wants to help us out.
For the most part I agree with your assessment. Also, keep in mind that you have done quite well for yourself by following these steps. $180K is much less than the $300-400K that many medical students are looking at these days, so I think you should be congratulated. I had classmates that had $120K in debt and tuition was between $10-15K when I was in school!
There is some light at the end of the tunnel I discovered recently while writing posts about IBR and PSLF. If you do residency, fellowship, and first job at a PSLF-eligible institution, much of your debt could be erased just 4 years out of fellowship. Although my generation was able to consolidate loans at 2% and was faced with smaller tuition bills, we also had to pay the whole debt back. Stay tuned for parts 2 and 3 of this series.
I have been fortunate to do #1, #2, #5, and am trying to do #7. Nonetheless, I graduated with about $110,000 in debt last spring, all of which was medical school as I graduated from my undergraduate school on the plus side in terms of scholarship money. While this is below the national average of $160,000 quoted by a representative of the AAMC, it is still a substantial amount of money. I can understand frustrations with the current cost of education. I am a really frugal person and lived under my means as much as possible. My medical school did a terrible job of informing us about student loans and is now only making efforts to better educate students on the front end rather than the back end (i.e. when you have to start thinking about paying). I live in the southeast and went to state schools for undergrad and medical school, so relatively speaking the cost of my education was not high. However, throughout the eight years of college and medical school, my tuition increased around 10-12% every year. Its hard to say when this will stop. I have read that the cost of tuition, at least at my school, does not cover the amount that it takes to educate each medical student.
The elimination of subsidized loans is a big blow as well. In four years you can get up to $34,000 in subsidized loans. If you qualify for IBR, you can get an additional three years of free interest on those loans. When my classmates and I were first being told about IBR, we thought it was too good to be true. I wouldn’t be surprised if that gets phased out just like the subsidized loans will be.
I can not understand why student loans for physicians have such a high interest rate? We must be subsidizing the interest rates for the loans for the online university of Phoenix people who pay the exact same rate, but have a much higher default rate. No way this is a free market in todays interest environment.
I also think part of the high rates are due to the IBR and PSLF programs. More to come on them. Loan forgiveness is an awful lot like default for those making the loans.
I really feel for those about to start paying back their loans. And as I head into dental school, I see an even less promising situation ahead of me because of the ridiculously high instrument fees (almost like a second tuition at many schools). My STATE school has an in-state expected 4 year cost of attendance of $301,899 for students entering in 2012-13, up about $40k from a year ago (thanks, CA budget cuts 🙁 )! Sure, that includes living expenses that can be decreased somewhat, but not much considering the high prices of tiny apartments in the Westwood area (if it wasn’t already apparent, this is UCLA). Now subsidized loans are gone, and a lot of that will have to be Grad PLUS due to the loan limits. Everyone I’ve talked to believes public loan forgiveness will be struck out once the Feds start to see the forgiveness (read: default) rate on those huge loans. The public perceives doctors as rich, and won’t want to foot the bill to give new docs free money. I was lucky enough to go to my undergrad state school on a 4 year full scholarship, worked a job the whole way through, and have no loan debt yet, but if something isn’t done to lower loan interest rates or at least make the payments deductible for high-earners, it’s going to be difficult to see the light at the end of a very long tunnel.
How’d it end up? I find much of this advice a bit humorous. If you’re from a state with high costs…. good luck. Private and OOS is just nuts. It’s almost better these days to try to move and get residency before applying to school. I have too many friends graduating with over 400k in only dental loan. Including undergrad for a few would put them over 500k.
Where in Alaska were you from? Is that frozen interest loan still around?
You mentioned doctors making lower incomes in future… I will contest that with my experience: Family Practice made $125k for five years in Lower 48, moved to Alaska and cleared $500k this year. I would make the HUGE recommendation that location is what matters most.
Now for the numbers update between University of Utah & Colorado:
2011: Utah in-state $15,000 out-of-state
Colorado in-state out-of-state $82,000
2014: Utah in-state $34,789 out-of-state $65,012
Colorado in-state $34,639 out-of-state $60,594
So…your beloved Utes have more than DOUBLED tuition in the past three years, while the Buffs are now cheaper and have frozen tuition. Interesting eh?
://medicine.utah.edu/admissions/faqs.php#average
http://www.ucdenver.edu/student-services/resources/CostsAndFinancing/tuition/graduate/Pages/SchoolofMedicine.aspx
That’s good to see Colorado has frozen tuition. I think my/your 2011 Utah in-state numbers are off though. $15K is about what in-state tuition was when I graduated in 2003. I couldn’t find 2011 numbers with a quick Google search today (look what you’re forcing me to do by reading and commenting on 3 year old posts).
At any rate, the point is the same- if you get into more than one school-go to the cheaper one.
It’s interesting that for all the worrying we all do about physician incomes falling, they really haven’t tanked all that much, although a few specialties (think radiology) have seen significant drops. Your experience is pretty extreme though- $125K is very low for FP and $500K is very high. Alaska has some unique aspects to it, especially once you get outside of my hometown (Anchorage.) I’m not surprised at all that an FP can make $500K there by working hard. And no, the Alaska Student Loan program has much different terms now than it did in 1993. http://acpe.alaska.gov/STUDENT-PARENT/Loans/State_Education_Loans
I pulled those 2011 numbers from your post in the second-to-last paragraph.
We honestly had no idea that our income was low and not competitive until we started looking around last year. It was a very bad contract. No retirement or benefits of any kind. Again, location and setting means a lot. For our family, getting far away from residency and the emotional PTSD associated with it was priceless though.
Merry Christmas from Santa’s House.
Yes, I saw where the numbers came from (me.) I’m skeptical I got them right though.
I graduated for the U of U undergrad around 2010 and remember looking at the cost of in-state for medicine, it was around $12K at that time. $15K sounds right for 2011 based on the rate of tuition increase at the time. In the few years since I joined the U of U SOM tuition is now ~$35K-36K for in-state and continues to grow. Where does this money go? I have a hard time imagining it has suddenly gotten that much more expensive to educate medical students within a few years time. I interview incoming medical students now and I asked them if they know anything about the cost of tuition and the changes that have taken place, no one can answer me and worst of all they tell me any amount of money you pay for your education is worth it to become a doctor. We have created a group of young impressionable students who think you can put no cost of becoming a doctor and we are doing them a disservice by not educating them. I am so thankful your site exists, this is much needed and I hope you readership continues to grow
Same problem among college students in general- not looking at return on investment.